Now that the Federal Budget has been delivered, the conversations have shifted from speculation to understanding what these changes may mean in practice.
Over the past few weeks, I have had more questions about this Budget than any in recent memory, and understandably so.
A number of the proposed changes have the potential to significantly impact business owners, investors and SME structures over the coming years, particularly around Capital Gains Tax, negative gearing and discretionary trusts.
The key message? Don’t make rushed decisions based on headlines alone.
This is the time to step back, review your position properly and understand what these changes may mean for you strategically.
Below is a summary of the key announcements I believe will be most relevant to you.
Capital Gains Tax (CGT): The proposed end of the 50% discount
One of the biggest announcements in this year’s Budget is the removal of the general 50% Capital Gains Tax discount from 1 July 2027.
Under the changes, the current discount would be replaced with cost base indexation for assets held longer than 12 months, alongside a 30% minimum tax on net capital gains. Importantly, this is not just a residential property measure.
The changes apply to all CGT assets, including:
- Shares.
- Units.
- Residential property.
- Commercial property.
- Business goodwill.
- Partnership interests.
- Other private business assets.
- Pre-1985 CGT assets.
At this stage, the only apparent concession is for new residential property. Investors in new residential properties will be able to choose between the existing 50% CGT discount or the new cost base indexation/ minimum tax model.
The Budget Papers also indicate that income support payment recipients, including Age Pension recipients, will be exempt from the 30% minimum tax.
Transitional arrangements and pre-CGT assets
The Budget Papers state that the existing 50% CGT discount should continue to apply to gains arising before 1 July 2027.
Given the commencement date, we expect many taxpayers will consider bringing forward transactions before 1 July 2027. However, many of the transitional arrangements remain unclear.
The Budget Papers suggest the changes will only apply to gains arising on or after 1 July 2027, although legislation will likely be required to explain how gains are divided between:
- The pre-1 July 2027 period, and
- The post-1 July 2027 period.
Possible approaches may include:
- A time-based calculation method based on how long the asset was held before and after 1 July 2027, or
- A market value-based approach using valuations as at 1 July 2027.
The Budget wording suggests the Government intends to protect gains accrued before 1 July 2027. However, the detail is not yet clear, including whether taxpayers will require formal valuations as at 1 July 2027.
This becomes particularly important for pre-CGT assets.
The Budget announcement states that capital gains on pre-1985 assets arising before 1 July 2027 should remain exempt from CGT. However, for pre-CGT assets continuing to be held after that date, the transitional arrangements suggest any future growth after 1 July 2027 may fall within the new CGT regime.
At this stage, it is not clear how post-1 July 2027 gains on pre-CGT assets will be calculated. It would appear logical that pre-CGT assets may require a market value uplift as at 1 July 2027, which may mean taxpayers holding pre-CGT assets will require valuations at that date.
The proposed 30% minimum tax
The Budget Papers refer to a 30% minimum tax on net capital gains, although the precise operation of this rule remains unclear.
Because net capital gains form part of assessable income, the proposed measure may limit the ability to use:
- Tax losses (other than capital losses).
- Tax-free thresholds.
- Certain tax offsets.
Further legislative detail is still expected, but one thing is already becoming clear:
Timing will matter.
For business owners or investors considering asset sales, succession planning or restructuring over the coming years, early planning and visibility around your position will become increasingly important.
Negative gearing changes: What investors need to know
The Budget also proposed significant changes to negative gearing rules for residential property investments from 1 July 2027.
Under the new rules, negative gearing concessions for established residential properties acquired after 7:30pm AEST on 12 May 2026 would be removed. Instead, losses from affected properties would be quarantined.
This means investors would only be able to offset those losses against:
- Residential rental income, or
- Capital gains from residential property.
Excess losses would be carried forward and may be applied against future residential property income or residential property capital gains in later years. Importantly, existing investments will be grandfathered.
This means investors who already own established residential property before 7:30pm AEST on 12 May 2026 should continue under the current rules unless the property is sold.
The proposed changes are expected to apply only to newly acquired established residential properties after that date.
Again, this reinforces the importance of reviewing structures, investment strategies and future acquisition plans early rather than reacting later.
Discretionary trust changes
Another major announcement was the proposed introduction of a 30% minimum tax on discretionary trust income from 1 July 2028.
While many details still need clarification, these proposed changes may significantly impact business structures currently operating through discretionary trusts.
Under the proposed rules, trustees would pay tax on discretionary trust income, while beneficiaries, other than corporate beneficiaries, would receive non-refundable credits for tax paid by the trustee.
Importantly, some types of income are expected to be excluded from the proposed minimum tax, including:
- Primary production income.
- Certain income relating to vulnerable minors.
- Amounts subject to non-resident withholding tax.
- Income from assets of discretionary testamentary trusts existing at the time of announcement.
The proposed minimum tax would also not apply to other trust structures such as:
- Fixed trusts.
- Fixed testamentary trusts.
- Complying superannuation funds.
- Special disability trusts.
- Deceased estates.
The Government has also proposed expanded rollover relief for three years from 1 July 2027 for businesses wishing to restructure out of discretionary trusts into other entities such as companies or fixed trusts.
This is an area where proactive advice and strategic planning will become increasingly important over the coming years.
Other key business measures
$20,000 instant asset write-off made permanent
From 1 July 2026, the $20,000 instant asset write-off will become permanent for small businesses with a turnover of up to $10 million.
Assets above $20,000 will continue to be managed through the simplified depreciation pool. For many SMEs, this creates greater certainty around asset purchases and business investment planning.
Company tax loss carry-back returns
The Budget also reintroduced company tax loss carry-back measures.
From 1 July 2026, eligible companies with aggregated turnover below $1 billion will be able to carry back revenue tax losses against tax paid in previous years. This may provide useful cash flow relief for businesses experiencing cyclical conditions, project delays or trading disruptions.
Measures impacting individuals
$1,000 minimum tax deduction
From 1 July 2026, eligible Australian taxpayers earning work income will be able to claim a minimum deduction of up to $1,000 for work-related expenses without itemising those deductions.
Taxpayers with work-related expenses above $1,000 will still be able to claim actual deductions under existing substantiation rules.
Importantly, the instant deduction will not replace other separately claimable deductions. Taxpayers may continue to claim deductions for charitable donations, union fees and professional association fees in addition to the instant deduction, where they otherwise qualify.
Working Australians Tax Offset
From the 2027–28 income year, a new Working Australians Tax Offset (WATO) will provide a permanent tax offset of up to $250 for eligible income earned from work. Further details regarding eligibility requirements are still to be confirmed.
Personal income tax changes
The previously announced personal income tax cuts for 2027 and 2028 remain in place:
| Income Threshold | 2026 Rate | 2027 Rate | 2028 Rate |
| $0 – $18,200 | Nil | Nil | Nil |
| $18,201 – $45,000 | 16% | 15% | 14% |
| $45,001 – $135,000 | 30% | 30% | 30% |
| $135,001 – $190,000 | 37% | 37% | 37% |
| $190,001+ | 45% | 45% | 45% |
As mentioned, the above is a summary of the main points of the budget that impacts the majority of the client base. There may be more that may impact certain clients.
What hasn’t changed: The importance of planning early
Right now, many business owners are asking whether they should restructure, sell assets or make immediate changes.
In most cases, the better first step is understanding your position properly before making reactive decisions. The earlier you plan, the more flexibility and options you generally have available.
What should you do now?
For most business owners, the priority right now is not panic. It is visibility.
If you are:
- Considering selling assets.
- Reviewing investment structures.
- Operating through discretionary trusts.
- Preparing budgets for the coming years.
- Planning succession or business transitions.
Now is the time to review your position properly and understand what these proposed changes may mean for you.
If you would like to discuss the Budget and how it may impact your business or investment position, we’re here to help.